The Dynamic Dividend

David Tepper’s New Favorite Dividend Stocks

Earlier this year a wrote a summary of David Tepper’s top dividend stocks, noting his uncanny ability to identify companies on the verge of huge dividend hikes. Now that his fund has disclosed its mid-year equity positions (here), it’s time to take a look at the dividend stocks he started piling into during the second quarter.

Appaloosa Management initiated positions in four dividend-paying stocks during the three-month period that ended on June 30. And while all of them are currently trading lower than they did during the second quarter, two have already given Tepper a raise in the form of payout hikes.

Here are the four dividend stocks Appaloosa began buying during the second quarter, along with a quick summary of their dividend track records and a look at where they trade today:

Cliffs Natural Resources (CLF)

Appaloosa bought 20,400 shares of CLF during the second quarter, initiating a relatively small position in the mining and natural resources company. At the end of June, Cliffs was the firm’s third-smallest equity holding.

Cliffs immediately rewarded its new shareholder by doubling its dividend in July, marking the second consecutive year the company has increased its payout by at least 100% and pushing the stock’s yield over 1% for the first time in nearly a year.

Shares of CLF had an average closing price of $90.90 during the second quarter, which is a 25% premium to today’s price. The stock is currently trading at $70.82, where it carries a 1.58% dividend yield.

Calumet Specialty Products Partners LP (CLMT)

Tepper bought 366,762 units of CLMT during the second quarter, making it Appaloosa’s ninth-smallest equity position at the end of the period. The producer of specialty hydrocarbon products represented 0.19% of the firm’s portfolio as of June 30.

Calumet initiated its quarterly distribution shortly after its 2006 IPO, paying $0.45 per unit right off the bat. Through some aggressive increases, thee partnership pushed its payout as high as $0.63 per unit less than a year later, but was forced to slash it back down to $0.45 per unit in 2008 as a result of historically high crude oil costs. Calumet has since taken a more conservative approach to growing its payout, opting for frequent nominal increases that have slowly pushed its yield into the 10% range.

The partnership’s 4% distribution hike last month pushed its payout up to $0.495 per unit and marked the fourth consecutive quarter Calumet had given its investors a raise. It was also, in all likelihood, the first time the company had raised its distribution since Tepper began buying into the partnership.

Units of CLMT had an average closing price of $21.61 during the second quarter, which is 9% higher than today’s price of $19.89, which produces a 9.95% yield.

The Mosaic Company (MOS)

Appaloosa purchased 2.39 million shares of MOS during the second quarter, causing by far the biggest ripple in its portfolio during the period. The phosphate and potash company was already Appaloosa’s seventh-largest equity position at the end of June, accounting for 3.8% of the firm’s portfolio.

Mosaic initiated its quarterly dividend in August 2008, and has yet to raise its payout, which remains nominal.

Shares of MOS had an average closing price of $70.47 during the second quarter, which is a 9% premium to today’s price. The stock currently trades at $64.73, where it features a paltry 0.31% dividend yield.

Walter Energy (WLT)

Tepper acquired 8,800 shares of WLT during the second quarter, easing into a position in the coal company. Walter represented just 0.024% of Appaloosa’s stock portfolio at the end of June, making it the firm’s smallest equity position.

Walter initiated its quarterly dividend in 1999 and had raised its payout only once through the end of 2006, when it spun-off Mueller Water Products (MWA). Since separating from its flow control business, the company has grown its payout by 150% via three large dividend hikes, including a 25% increase last year.

Shares of WLT had an average closing price of $124.22 during the second quarter, which is a huge 65% premium to today’s price. The stock is currently trading at just $75.38, where it features a 0.66% dividend yield.